According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) broker Erik Pica (Pica) has been subject to three customer complaints. Pica is currently registered with Joseph Stone Capital L.L.C. (Joseph Stone). Many of the customer complaints against Pica concern allegations of high frequency trading activity also referred to as churning, unauthorized trading, unsuitable investments, and speculative investment strategies.
The last customer complaint occurred in May 2018 when a customer alleged unauthorized trading in Rite Aid and Valeant Pharmaceutical leading to $7,613 in damages. The claim is currently pending.
Also in May 2018 another customer alleged negligent supervision, overconcentration, and unsuitable investments causing $293,000 in damages. The claim is currently pending.
In March 2018 another customer alleged $500,000 after claiming that Pica engaged in unsuitable investments, churning, and other claims. The claim is currently pending.
When brokers engage in excessive trading, sometimes referred to as churning, the broker will typical trade in and out of securities, sometimes even the same stock, many times over a short period of time. Often times the account will completely “turnover” every month with different securities. This type of investment trading activity in the client’s account serves no reasonable purpose for the investor and is engaged in only to profit the broker through the generation of commissions created by the trades. Churning is considered a species of securities fraud. The elements of the claim are excessive transactions of securities, broker control over the account, and intent to defraud the investor by obtaining unlawful commissions. A similar claim, excessive trading, under FINRA’s suitability rule involves just the first two elements. Certain commonly used measures and ratios used to determine churning help evaluate a churning claim. These ratios look at how frequently the account is turned over plus whether or not the expenses incurred in the account made it unreasonable that the investor could reasonably profit from the activity.
The number of complaints against Pica are unusual compared to his peers. According to newsources, only about 7.3% of financial advisors have any type of disclosure event on their records among brokers employed from 2005 to 2015. Brokers must publicly disclose reportable events on their CRD customer complaints, IRS tax liens, judgments, investigations, and even criminal matters. However, studies have found that there are fraud hotspots such as certain parts of California, New York or Florida, where the rates of disclosure can reach 18% or higher. Moreover, according to the New York Times, BrokerCheck may be becoming increasing inaccurate and understate broker misconduct as studies have shown that 96.9% of broker requests to clean their records of complaints are granted.
Pica entered the securities industry in 2004. Since then almost every firm Pica has been associated with has been expelled by FINRA. Since April 2015 Pica has been associated with Joseph Stone out of the firm’s New York, New York office location.
At Gana Weinstein LLP, our attorneys are experienced representing investors who have suffered securities losses due excessive trading and other securities laws violations. Our consultations are free of charge and the firm is only compensated if you recover.